Sports Facility Financing and Development Trends in Europe and Germany 2003 Michael Siebold

Home , 2006 in Germany, Allianz Arena, Niedersachsenstadion, Westfalenstadion

Marquette Sports Law Review Volume 15 Article 9 Issue 1 Fall

Angela Klingmüller

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Repository Citation Michael Siebold and Angela Klingmüller, Sports Facility Financing and Development Trends in Europe and Germany 2003, 15 Marq. Sports L. Rev. 75 (2004) Available at: http://scholarship.law.marquette.edu/sportslaw/vol15/iss1/9

This Symposium is brought to you for free and open access by the Journals at Marquette Law Scholarly Commons. For more information, please contact [email protected]. SPORTS FACILITY FINANCING AND DEVELOPMENT TRENDS IN EUROPE AND GERMANY 2003

MICHAEL SIEBOLD* &

ANGELA KLINGMULLER **

"Touring Europe is not popular with my people, because you are always having to work in 200-year-old venues." This statement was made by a respected United States (U.S.) concert promoter, who prefers to remain anonymous, at a conference in the United States. To a certain extent, it might be true that some of the European venues have an antiquated charm. However, the overall perception is certainly wrong. Europe has made great progress in recent years developing arenas and stadia that offer the highest standards for players, performers, and visitors. Before that time, design concentrated on capacity rather than on comfort and safety, and often stadia were updated only when a country was awarded a major sporting event, such as the soccer World Cup, or a major athletics tournament, such as the Olympic Games. The change occurred in the 1980s and early 1990s: design moved on top of the agenda when the soccer World Cup held in Italy in 1990 delivered stunning visual creations of stadia. Coupled with stadia tragedies, the United Kingdom (U.K.), in particular, demanded safer stadia and produced a climate in which stadia, arenas, and major concert venues came into the public spotlight.

Founding partner of Arnecke Siebold law firm, is a German native with considerable international experience. .. LL.M., studied at the Universities of Bayreuth, LMU Munich, Cape Town, Duke University School of Law (LL.M. 1993), Doctor of Laws University of MOnster. She is a partner of the law firm of Arnecke Siebold where she specializes in sports and entertainment law, real property law, commercial leasing, sponsoring law, aviation law and environmental law. MARQUETTE SPORTS LA W REVIEW [Vol. 15:1

I. FACTORS WITH AN IMPACT ON DEVELOPMENTS IN THE STADIA AND ARENA BUSINESS

A. Catastrophes/TragicIncidents Tragic incidents or catastrophes have the fastest impact on the way stadia/arenas are being built today. In the 1980s, the European venues had acquired a rather negative reputation. This was due to a number of tragic incidents and catastrophes with regard to spectator access and constructional failures - most of them in the context of soccer events. One of the most traumatic events happened during the European Cup game of Juventus Turin ("Juve") versus FC Liverpool in the Belgian Heysel Stadium in Brussels in May 1985. The so-called dream final turned into a horror scenario after ticket sales got out of control, neutral blocks between the British and Italian fans were missing, and Liverpool fans started to rampage in order to provoke the fans of Juve. Excitement turned into panic, and the situation escalated. People tried to flee, but were stopped by walls and fences that ultimately gave way to the crowds putting pressure on them. Thirty-nine people were killed; hundreds of people were injured and needed treatment. Another catastrophe, known as the "Tragedy of Hillsborough," happened in 1989 in Sheffield, United Kingdom. After a gate of a grandstand collapsed during the British semi-final between, again, Liverpool and Nottingham Forrest, 96 spectators were killed; 200 were severely injured. Medical treatment was insufficient, and the police realized too late that the fans were crowded towards the field in an area where a fence threatened to be crashed by the 4000 Liverpool late-arrivers. The inside doors to the stadium were opened too late. As a consequence, some major changes occurred in the way stadia are being built. Today you will find all-seater stadia, as well as the ban of alcoholic beverages during game time in most sports in most venues; ticket sales are being managed differently, and fans are being treated and observed.

B. FIFAIUEFA Stadia Requirements

In order to be selected as a host, the Federation Internationale de Football Association (FIFA) and Union of European Football Associations (UEFA) have strict minimum standards the venue must fulfill. With regard to the soccer World Cup 2006, FIFA requires, for example, that the stadia have a capacity of at least 40,000 seats for first-round and quarter-final matches and at least 60,000 seats for the opening match, semi-finals, the third-place playoff, and finals. The venues must be "all-seater" only; the seats should all 2004] FACILITY TRENDS IN EUROPE AND GERMANY be covered, and the stadia must have video surveillance. Furthermore, the stadium operators must guarantee "advertising-free" venues for the duration of the World Cup. The cities and stadia must be decorated according to FIFA special requirements. All promotional measures and activities will be coordinated by FIFA and the local organizing committee. The World Cup 2006 in Germany shall also take into account the environment, which means that when building or reconstructing stadia, environmental-friendly material and techniques shall be used.

C. Changed Customer

Changes in the development of stadia and arenas also occur because of a changed "customer." Of course there are still the "die-hard" fans who will come to see even a losing team. However, there is also a "new" crowd for whom going to the game is just another form of entertainment. For them, sports events are "social events," and the new venues are a place to be. Sports are now competing with all other forms of entertainment like theme parks, touring shows, museums, zoos, etc. The new consumer is more sophisticated and wants more out of the venue than simply the soccer game. The ambience, ddcor, restaurants, availability of parking, etc. have become increasingly important, and it is often on the basis of these "soft factors" that they make a decision. Today's customer has choices; therefore, the sports venues have to be - and are - prepared to compete with other forms of entertainment.

It. "HOT" DEVELOPMENT TRENDS IN GERMANY AND EUROPE

A. Multipurpose Nowadays the trend is moving toward stadia that will be host to sport events and also to concerts, etc., and most of them seem to be integrated into a whole entertainment complex with hotels, shopping centers, and the like. The same is true with regard to arenas. In Germany, by now almost all, single-usage arenas have been turned into multipurpose arenas. Ko1n Arena was the role model in Germany; the most recent example is the new Color Line Arena in Hamburg.

B. Luxury Suites and Business Seats Luxury suites are not a new phenomenon in Germany or Europe; however, in the beginning there was little functionality with the luxury suites themselves MARQUETTE SPORTS LA W REVIEW [Vol. 15:1 and only few business reasons for them to exist. This has changed dramatically, in particular, over the past few years. Today the inclusion of private suites is an essential component to any revenue plan in a stadium or arena.

C. Safety Concerns September 1 th, as the most intense example of terrorism in the Western world ever, had a major impact worldwide. Safety and security measures were increased tremendously for a number of weeks. However, the effect faded before long, and only some rather minor features of increased security remained. Also one has to admit that whilst airports and public buildings received enormous attention and the most safety and security measures in the aftermath of September 11 th, the protection of the so-called "soft targets" like stadia, arenas, and conference and convention centers had little to no additional measures to introduce. The reason was that most of them were already applying quite a strict and high standard of security. As an example of how sports venues dealt with the impact of the September 11 th crisis, the German Soccer Federation (DFB) introduced a new evacuation measure program and informed its participating clubs, as well as the leagues and stadia, on it. In preparation of the 2006 World Cup, the World Cup organization committee is working on the security and safety plan. Several electronic devices are being discussed, and new machines are being introduced to scan people and the equipment they bring into the venue.

III. EXAMPLES OF STADIA AND ARENAS IN EUROPE

A. Netherlands Although Italy set the trend in particular with regard to design developments when hosting the World Cup in 1990 and has wonderful stadia, the milestone with regard to the multipurpose development in Europe was set in the Netherlands with the Amsterdam Arena, which opened in August 1996. It was the first stadium in Europe to feature a sliding retractable roof, and the first stadium in the world with a road running beneath it. It has since been the home of the Amsterdamsche Football Club's (AFC) Ajax and the Amsterdam Admirals team in National Football League (NFL) Europe. It provides seating capacity for more than 52,000 spectators. Amsterdam Arena is a multi-functional venue that can be used for a variety of events, such as music concerts, presentations, theatre performances, ice skating galas, celebrations, etc. 2004] FACILITY TRENDS IN EUROPEAND GERMANY

B. France

As organizer of the 1998 Soccer World Cup, France and Paris needed a world-class stadium. The Stade de France, looking like a flying saucer, accommodates 80,000 visitors and can host all kinds of sports and cultural events. It was a ten-year project that started with France being a candidate to host the soccer World Cup in 1988 and was completed with the opening in January 1998.

C. UnitedKingdom In the United Kingdom, several projects are underway, like Coventry and Cardiff. The most prestigious one is, of course, the Wembley Stadium in London. After a lengthy selection process, the Wembley Stadium will be the site of the English National Stadium. Work started on the 90,000 capacity stadium in the summer of 2002. The new stadium is designed to maximize spectator comfort with unobstructed views of the action, wider seats, and a new concourse wrapping around the building to allow easy circulation and provide catering for up to 40,000 spectators at any one time. The stadium is constructed over the footprint of the original 1960s Wembley Stadium. It is a multipurpose stadium designed to host football and athletic events, as well as concerts. The famous characteristic of the new Wembley Stadium is a spectacular 103-meter-high arch that will tower over the 52-meter-high stadium and provide a dramatic landmark across the city skyline. The arch is not only contributing to the esthetics of the stadium, but is also an integral part of the stadium's sliding roof support structure.

D. Portugal Portugal will be the host of the 2004 UEFA European Football Champions Finals. For Portugal, the Euro 2004 competition has meant the construction or remodeling of ten stadiums and the building of new support infrastructures. Two spectacular examples are Estadio Algarve and Baraga Municipal Stadium. Estadio Algarve has been created as a centerpiece of the new park development between the two cities of Faro and Lule. Key to the stadium's design are two removable stands at either end of the pitch that can easily be stored away. One of the major challenges in building the Algarve Stadium was to ensure that it not only met the high standards required for Euro 2004, but was also capable of providing facilities for hosting concerts, training camps for European clubs, and other activities once a tournament is over. It is said to MARQUETTE SPORTS LA W REVIEW [Vol. 15:1 be a stadium with a design linked to the local setting. Baraga Municipal Stadium is a project praised to be a "work of art." It has a revolutionary design with only two stands running along both sides of the pitch and seating all 30,000 spectators. The stands are linked by a steel and concrete roof in a gridiron pattern, allowing a flow of natural light onto the pitch. The roof is not the only innovation. The south end of the pitch, which is built into a mountain, will be a huge wall of granite onto which a giant screen will be placed. The other end will be open, offering a view of the surrounding countryside.

E. Germany After hosting the soccer World Cup in 1974, soccer will be coming home to Germany after thirty-two years when Germany will be host to the 2006 World Cup. The decision has created a wave of planning and building activities in Germany: Out of the twelve cities that have been selected as host cities, five were/are constructing brand new stadia, and seven are conducting substantial reconstruction or expansion projects of their existing venues. Preparations are well under way, and the excitement is growing. Arena "Auf Schalke" is currently regarded as the state-of-the-art role model. It is a multipurpose arena that includes a retractable roof and a pitch that slides in and out of the bowl. The complex incorporates facilities such as hotels, offices, fitness centers, and even television studios. It has a capacity of approximately 54,000 for European and international matches. Regardless of whether the roof is open or closed, the spectators are all under cover. In Munich, we will see a completely new stadium - the Allianz Arena. Munich hosted the Summer Olympics in 1972, and the Munich Olympic Stadium, which was also the showcase venue for the 1974 World Cup, was hailed as an architectural masterpiece with its famous "cobweb design." Nevertheless, in the meantime, it had been criticized as inadequate for soccer matches, and, in particular, FC Bayem Munich wanted a new stadium. The Allianz Arena will be host to the FC Bayern Munich, as well as 1860 Munich (both clubs playing in the premier division). It will have a capacity of 66,000, and the walls of the stadium will be comprised of inflatable plastic cushions. The colors of the cushions will change depending on what team is playing at home. This means white and blue for 1860 Munich or red and white for FC Bayern Munich. It has already been nicknamed as "rubber-boat" because of its appearance. One more interesting side note is that the new Allianz Arena is the exception to the "multipurpose trend": it will be for soccer only, with no athletic tracks and no multipurpose features. Summing up, there are a lot of things going on in the development of 2004] FACILITY TRENDS IN EUROPEAND GERMANY stadia and arenas in Europe, from rather efficient stadia to "pieces of art." All have in common that they contain plenty to please the "sports purist," but they also draw new audiences with the so-called "soft factors."

IV. FACILITY FINANCING TRENDS IN EUROPE AND GERMANY

The most activity presently can be seen in Germany in preparation of FIFA World Cup 2006, the next mega event following the Olympic Games in Athens in 2004 and the UEFA European Championship in Portugal also in the summer of 2004. Most of the activities with respect to the games in Athens and the Euro in Portugal should have come to a close, and no new business may be expected from those two events. As a matter of fact, most of the contracts for the stadia in Germany for 2006 have also been signed and are underway as well. Europe is blessed with an event that has taken place every four years since 1960 in a different country or in different countries: the UEFA European Championship in soccer with sixteen teams competing over a period of roughly three weeks to establish the new European champion. Therefore, every four years one or two countries have an opportunity, by hosting this major event, to refurbish between a minimum of six and a maximum of twelve stadia, build new ones, or at least refurbish them to a state-of-the-art stadium. With the new football associations having been established in Eastern Europe over the past ten to fifteen years, we can be certain to see some major development in new stadia in that area in the next twenty years to come, in particular, given the little investment made into those stadia in the past decade.

V. RECENT DEVELOPMENTS IN SOCCER

To give you an overview of the market we are talking about, Deloitte & Touche estimates the overall European football market to arrive at Euro 7.1 billion, even Euro 10 billion when adding the minor leagues. The biggest markets are the United Kingdom, Spain, Germany, Italy and France, then a couple of smaller markets in the 1% - 2% or 4% area, and then many UEFA members with their markets together making up only 3% of the total. Apart from the devastating incidents referred to above, three major incidents or developments have led to the new generation of stadia in central and western Europe.

A. Change of Income Stream You have all heard of the Bosman judgment issued in December 1995 when a not-so-talented Belgian player changed the whole transfer system in MARQUETTE SPORTS LAW REVIEW [Vol. 15:1

Europe.1 Players become free agents at the end of their current contracts and are permitted to negotiate a new contract with other clubs during the last six months remaining on the existing contract at their current club. In 1998, the European Union (EU) expanded its review from the UEFA rules to the FIFA rules to the extent they effected EU transfers. In the summer of 2000, intense negotiations took place between FIFA, UEFA, and EU, and a Transfer Task Force was established; however, no solution could be found, and it took until September 2001 until new transfer regulations were implemented. The overall economic effect for the clubs was that they could no longer rely on the transfer money as a property - an asset they owned with every player they signed - and the enormous amount generated by transfer was simply no longer available for clubs. Therefore, new sources of revenues needed to be found.

B. BroadcastingRevenues

The generation of additional, or the increase of existing, revenues became apparent, and in 2001, the market still saw enormous television money being generated. As a matter of fact, for the big five leagues, aggregate broadcasting revenue has become and still is the most important source of revenue. For the 2001-2002 season, the new broadcast deal for the English leagues with British Sky Broadcasting Group (BSkyB) and Independent Television (ITV) brought an increase of 32% to reach the Euro 774 million mark. Nevertheless, for the English leagues, broadcasting revenues still constitute only 42% of the total league revenue whilst in both France and Italy, with the extraordinary increase in broadcast revenues in 1999 and 2000 when broadcasting income rose by 51% in both leagues in a single year, broadcasting revenue contributes over half of the total revenue in those leagues. Germany, as the most lucrative sponsorship market in Europe, providing approximately 40% more in sponsorship revenue than the nearest rivals Italy and France, has somewhat moderate broadcasting deals with only 40% of the overall revenue stemming from television rights. The question then is can the levels of broadcasting income last, and the answer is no. In Europe, we saw ITV go bankrupt in the United Kingdom, the Kirch-Group go bankrupt in Germany with an effect on broadcasting income already last season and this season, as well as the difficulties in the Italian league and the Spanish leagues to sign new broadcast contracts, in particular,

1. For a discussion of the Bosman case, see Piet Van Nuffel, Bosman, 2 COLUM. J. EUR. L. 345 (1996). 2004] FACILITY TRENDS IN EUROPEAND GERMANY for the smaller clubs in the less-densely populated areas. It is safe to state that the tremendous rate of broadcasting revenue growth that occurred in the late 1990s is not going to be repeated. However, the broadcasting revenues are not collapsing. The revised German deal, for example, means that it is still at 75% of the value of what it was in the gloom and doom days. In the United Kingdom, the Premier League announced a new one billion pounds plus television deal on August 8, 2003, thereby bypassing Brussels after frustrating negotiations with the EU.2 However, if this deal goes through as announced, the European Monopolist Commission will meet the Premiership in court. In a nutshell, with respect to broadcasting rights, one can state that every industry sector's growth curve slows eventually; that is what has happened to the broadcasting income. It remains true that television needs football as much as football needs television. Broadcast rights these days are being packaged in an ever more creative manner with increased sophistication of rights windows. We are not talking only of live games being broadcast, but also video on demand, mobile telephone, and broadband internet rights, etc. In addition, European football, at least the top leagues, is being transmitted to Asia and South America more and more, opening up huge markets there. Manchester United and Real Madrid are leading the pack in this instance. We already mentioned opening new markets for broadcasting rights. These markets will then also be available for merchandising and even match- day sales as teams tour Asia, the Americas, Australia, and, in the future, possibly Africa to open new markets. Last, but not least, this brings us to the issue of leveraging more revenue out of the stadia. An improvement of match-day performance - by developing hospitality, match-day revenue, or simply by increasing attendance and thereby revenues - is a major issue. Only the English Premiership has a 93% capacity utilization.

2. See BskyB and BBC Net Football Deal, BIRMINGHAM POST (United Kingdom), Aug. 9, 2003, at 1. MARQUETTE SPORTS LA W REVIEW [Vol. 15:1

C. FinancialFacts and Figures of the "BigLeagues" in Europe